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American Expat Taxes and the Prospective Trump Tax Act

Transcript of the above video:

In this video today we are going to be discussing, Well, exactly what the title says, the Trump Tax Act or the proposed Trump Tax Act. At the time of this video, the Bill has passed through both the lower house, the House of Representatives as well as the United States Senate. It’s currently undergoing its metamorphosis, in the cocoon, we call the conference committee and I think it’s fairly certain, fairly likely, we are going to see, probably before the end of the year 2017, a Bill come out that will eventually see Trump’s signature although as of yet we have yet to see a finalized Bill come out of the conference committee.

I just want to go over a few things. Right now we don’t know how this is going to fully play out. This video is being done on December 12, 2017 so as of this time we don’t know exactly how this is going to play out and I basically want to make this video to go over a few things that I thought were rather interesting if only from an American expat perspective. A recent article in the New York times, it was published December 2, 2017. The headline is “Tax Bill Offers Last Minute Breaks for Developers, Banks and Oil industry”. A few things I thought were interesting. Off shore tax break. Quoting from the article, “ A provision to give multi-national companies like Pfizer, Google and Apple a tax break on the benefits they have accumulates in off shore tax havens was made less generous than earlier versions of the proposal but the companies would still bring those earnings home at rates of 7.5%-14.5%, well below the existing corporate income tax rate of 35% and also lower than the corporate income tax rate which the bill would cut nearly in half to 20%. This break will still save the companies roughly half a trillion dollars compared to the current law according to an estimate by a designer research group”. Now a couple of things. I found it interesting that they brought the corporate tax rate or they are trying to bring the corporate tax rate at least, presumable down to 20%. That is the current corporate tax rate here in the Kingdom of Thailand, as at the time of this video. But the other thing is the prevailing thinking with regards to off shore funds of American multi-national corporations, the prevailing thinking seems to be “Look, if those funds can get repatriated, if there’s going to be a trickle-down effect of some sort or they’ll use those funds to invest in further infrastructure in the United States or something like that.

I am not really interested in making this video to get off into a political point about whether that is true or not, that just seems to be the policy thinking behind this undertaking and it remains to be seen where the rates are actually going to be set at, but for those who work for multi-national corporations with offices abroad, this may be of interest as I could see a situation where, you know, Ross Perot once made the quote, he once made the observation of the “giant sucking sound” would be heard from off shore in various industries from the United States and it seems that maybe, and this is a big maybe I think, but maybe nonetheless, that you could hear a reverse “sucking sound” of money in multi-nationals’ off -shore coffers and they say “Look, this may be one of the few rare instances where we are going to be able to get that money repatriated back in the United States at a much more reasonable rate than what we have previously been used to and we do have infrastructural issues we need to take care of and we do have expenses in the US that we would like to take care of that we felt that we really didn’t want to deal with as long as the rates of taxes were going to be so high”. So I can kind of see the argument. It remains to be seen how this is fully flushed out but I can kind of see where they’re coming from. Another thing with respect to this. The topic itself is not so much of interest but I will get into why I want to bring up this final quote from the article. Again, quoting directly, “Alternative minimum tax confusion. The Bill extends so called bonus depreciation, the ability to take big deductions related to certain corporate investments at a cost of 34 billion, but pays for it by reinstating the corporate alternative minimum tax. The last minute decision to scrap the repeal of the corporate alternative minimum tax left lawyers and accountants scratching their heads about the ultimate impact. Several experts said it appeared unintentional that the benefit of the tax credit for research and experimentation could effectively be lost; the provision is dear to many businesses. I strongly urge to read this article. It’s very much worth a read. It gives a fair amount of insight with respect to not only the metamorphosis of this bill as it’s taking shape but also to the underlying issues with respect to it. The reason I brought up the AMT issue, the Alternative Minimum Tax issue is because a lot of this bill is still very much in the flux. I think it got kind of passed at the 11th hour; it got passed like at 2am on a Friday, or on a Saturday morning. It was passed amid a fairly large, fair amount of sort of flurry of confusion, a sort of fog of politics if you will and I think there are certain aspects of it that are going to get ironed out obviously in the conference committee where the House and the Senate have to rectify their 2 bills before handing it off to the President for proposed signature.

But I think moving forward, you are going to see more of this where basically things that are just sort of inexplicable are hammered out in the conference committee or in some cases are simply not hammered out at all. One of the weirdest things about being a tax attorney and working in these areas is you‘ll see these things in the law and basically you say “why is that there? why does this exist?” Well, sometimes it’s hard to say. Sometimes it came about because some interest group managed to get a congress person to sort of amend something that was sort of to their benefit but then it had this kind of radical tangential effect, almost in effect like a “butterfly” effect, legislatively for lack of a better term whereby something is inserted into this legislation that was designed for a specific purpose, oftentimes usually an interest group stands to benefit from it, and then it results in this sort of tangential benefit or disadvantage to a totally unrelated group, a group that nobody would have seen that being an issue at the time they passed the legislation. So the thing to take away from this video is that this stuff is still very much up in the air; we will keep you updated as the Bill progresses and provide as much insight as we can into the practical applications and impact of these provisions.